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China April Auto Sales Jump 37% on Government Support (Update2)
By Eugene Tang

May 8 (Bloomberg) -- China’s passenger-vehicle sales rose 37 percent last month, the most in three years, as government subsidies spurred demand for minivans and small cars.

Local drivers bought 831,000 cars, minivans and other passenger vehicles in April, the China Association of Automobile Manufacturers said in an e-mailed statement today. Vehicle sales, including buses and trucks, rose 25 percent to 1.15 million.

China has withstood a global slump in auto sales after the government cut retail taxes and began handing out 5 billion yuan ($733 million) in subsidies to help boost demand. Volkswagen AG and other automakers are expanding in China, the world’s largest auto market so far this year, to offset tumbling sales in Europe and the U.S.

“The increase was impressive, but it’s sure to slow,” said Qin Xuwen, a senior analyst at Orient Securities Co. in Shanghai. “Subsidies can only sustain demand for so long amid the current economic situation.”

General Motors Corp., the biggest overseas automaker in China, boosted sales in the country 50 percent last month on demand for minivans, which account for 63 percent of its sales.

In the first four months of the year, China’s vehicle sales rose 9.4 percent to 3.83 million. That compares with 3 million in the U.S., where sales tumbled 37 percent amid a recession.

Still, increased sales of minivans, which cost as little as $4,400 each, has done little to help Chinese automakers’ earnings amid cutthroat competition. The combined profits for the nation’s top 19 automobile groups fell 48 percent in the first quarter to 10.8 billion yuan, according to the association. Revenue dropped 14 percent to 269 billion yuan

Volkswagen and partner China FAW Group Corp. will invest 550 million euros ($737 million) to expand a plant in Chengdu city, Li Huile, a China FAW spokesman, said today by phone.

http://www.bloomberg.com/apps/news?pid=20601089&sid=adVMsNLw4z9w